If you’re considering starting a side hustle this year, you’re not alone. According to a survey from Bankrate, 50% of millennials and 53% of Gen Zers already have a good start side hustle and that number continues to rise.
Starting a side hustle allows you to make extra money on top of your day job while diversifying your risk. If you get laid off a side hustle can help keep you afloat until you find something new.
There are other reasons you might consider starting a side hustle too. You can use it to boost your resume by honing your skills or learning something new. If you have an expensive hobby, turning it into a side hustle can help you offset some of the costs so you can continue doing what you love.
Before you start a side hustle, you’ll want to create a plan. These are some important steps you’ll want to follow as you get started.
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- Determine your goals — do you want to pay off debt, invest more, or even quit your full-time job?
- Figure out what you are good at and how much time you can devote to this side hustle.
- Research similar businesses to figure out what you should charge, but don't get too caught up in pricing.
- Get online or network locally to find clients or customers.
Set a goal and start a side hustle
Before you start, you’ll first want to identify how a side hustle fits into your overall financial goals. A side hustle is a lot of work. There will be days when you feel like throwing the towel in. Tying it to a bigger goal will keep you motivated. Some common goals for starting a side hustle are:
- Reducing debt
- Growing wealth
- Personal development
- Eventually quitting your full-time job
Also, set short-term and long-term income goals and be clear on how much time you can devote to your new venture.
Determine your skills
Now it’s time to figure out what side hustle works best for you. Look for something that aligns with your existing skills and interests.
Start by looking at your full-time job. What parts of your job do you like? What parts do you dislike? Over the next few days, jot some notes down while you’re at work. Pay attention to your energy levels, ability to focus, and any tasks that leave you feeling fulfilled when you complete them. These things can help identify the type of work you’d enjoy doing as a side hustle.
Assess your skills
What comes easy for you that others seem to struggle with? We tend to think that because something is easy for us means that it's easy for everyone. Not true. Helping people with something that is easy for you to do, but others seem to find difficult is a great side hustle idea.
If you’re still stumped, look at how you spend your free time outside of work. Your hobbies can be a good indicator of the type of side hustle you might enjoy doing. If you like to bake, for example, you could pick up a part-time job at a bakery or sell homemade baked goods at a weekend farmers market.
Another option is to look for what people are already willing to pay for. Scan sites like Facebook or Nextdoor to see what your neighbors are posting about. If you constantly see posts asking for recommendations for a pet sitter and you enjoy being with animals, that could be an easy entry point to an in-demand side hustle.
When in doubt, an app-based side hustle could be an option, too. If you enjoy driving, you could sign up with Lyft or DoorDash. Or, if you don’t mind spending time cruising the aisles at grocery stores, Instacart can be an option to consider as well.
The key to finding success in a side hustle is aligning what you enjoy doing with people who are willing to pay for your product or service.
Figure out your time commitment
Before you start a side hustle, you’ll also want to figure out how much time to allocate to it. If you like the idea of working at a bakery but can’t commit to early mornings, that might not be the right side hustle for you.
Start paying attention to your time and look for blocks in your schedule where you could fit a side hustle in. If it doesn’t seem like you have the time, start keeping track of your activities. You might find that you spend more time in a day scrolling on social media than you thought — that time could be better used working on your side hustle.
Pay attention to your time
You’ll also want to think about how much time it will take you to produce a product or create a service. If you enjoy knitting and are thinking about starting an Etsy shop, factor in the amount of time it takes to produce inventory. Spending 15 hours creating a scarf may be an enjoyable labor of love, but if you can only sell it for $30, it’s not a very lucrative side hustle.
Consider other demands on your time as well. If you have kids, you might consider a side hustle that offers flexibility. Or, with some side hustles, you might even be able to include your kids and teach them a thing or two about earning money in the process. For example, a pet-sitting business might be a great side hustle to do with kids.
Finally, determine the amount of time you genuinely want to dedicate to your side hustle. Just because you have the option to invest nights and weekends doesn't imply you should. Establish clear boundaries between your personal life, your day job, and your side hustle. The worst mistake is immersing yourself in something that could ultimately lead to burnout.
Research your rates
A side hustle is meant to bring in extra cash. While it might not make you the next millionaire, you do want to ensure the side hustle you choose is worth your time and effort.
Ask around to see how much other gig workers in the same field are making. Watch YouTube videos to see how much you can reasonably expect to make. In some cases, you can even download the apps to see what times have a higher demand for workers and what boosted rates look like during those times.
Do the same thing for service gigs. If you’re thinking of providing a service like snow removal, pretend to be a prospective client and reach out to your competition. Figure out what they charge so you can set a competitive price. Not to mention, this competitor research is a good way to see how saturated the market is.
With some side hustles, it will be easier to get started first and adjust your rates later. This is especially true if you’re monetizing a skill, such as being a freelance writer or virtual assistant. Even if you’ve never had clients before, the best thing to do is just start. Build a reputation for yourself to begin acquiring clients. After working with a few clients, you’ll have a better sense of what you can charge for your services.
Related: How to start a business with no money
The legal side of starting a side hustle
Depending on your side hustle, there may be some legal paperwork you’ll have to navigate. If you plan on taking a part-time gig somewhere that will put you on payroll, or if you don’t expect to make more than a few hundred dollars in a year, you won’t have to worry about making your side hustle official. But if you expect to earn more or want to turn it into a business someday, you’ll want to set it up right from the get-go.
Get an EIN
An EIN or Employer Identification Number. This is kind of like a Social Security number, but it’s used for your business. You can get one here for free. You'll need this to get a bank account, and it's safer than sharing your social security number with clients, which you may need to do.
If you work as a contractor, your clients will ask you to complete a W9. This is so they can send you a 1099 at the end of the year and report your earnings to the government. This is similar to what happens when you are an employee.
For most side hustles, you’ll probably want to start as a Sole Proprietorship or set up an LLC. If you think your side hustle might turn into a bigger business, talk with an accountant to determine the right business structure for you.
Start a side hustle and set up a business bank account
One of the most important things you’ll need to do before you start your side hustle is figure out how you’re going to get paid. To do this, you should consider setting up a separate business bank account. This keeps your side hustle income and expenses separate from your personal life and will make preparing your taxes much easier.
You may also want to open up a business credit card, especially if you do register your business as an LLC. This helps your business establish credit, which can be important down the road if you need to take out a business loan.
Related: Do I need an LLC?
Learn the local laws
Every state, county, and town has its laws for how you do business and the type of business you’re allowed to do. If you want to start an at-home bakery, some municipalities might require you to complete a food safety certification course. Some would submit to a health inspector visit. You might go through all the work planning the perfect side hustle only to discover this is a non-starter.
Here are a few legal things you’ll want to consider:
- Do you need a business license or permit? You may have to get a license to work from home or to be able to charge sales tax if you sell products.
- Do you want to use a business name? If you want to be able to collect money under your business name rather than your own, you’ll likely need to set up a DBA or “doing business as.” This might also be called a “tradename” and is typically handled by the Secretary of State. Look and see if there’s a form you need to fill out and how much it will cost to file it.
- Do you need insurance? It’s always a good idea to have insurance in case something happens. Some side hustles, like performing home repairs, might even require it. If you actually enter people's homes you may also consider a bond.
- Do you need a certification? On top of filing your business with your state, you may also need to complete an industry certification. For example, this is true for hair stylists and food service workers.
Most states and municipalities offer free resources that can help you get started. Contact your local Small Business Administration office if you need help getting your side hustle set up.
FAQs
How can I make $1,000 a month from a side hustle?
Earning $1,000 a month is a good goal to start with. But it will largely depend on the type of side hustle you do and how much you can earn from it. If you provide a service or work a part-time job, your ability to earn $1,000 in a month will be determined by the amount of time you work and what you charge per hour.
If you can only allocate 20 hours per month to your side hustle and charge $25 per hour, making $1,000 per month might not be feasible. On the other hand, if you have a spare room you could rent out on Airbnb you might be able to easily make $1,000 a month.
What is a good side hustle to start?
There are an endless number of side hustle ideas out there. It really depends on how much you are willing to put in as upfront costs and how much effort you are willing to put in upfront.
If you want to start a service-based side hustle, look around at your community and see who needs help and what you can help with. For example, if your coworker is always complaining about not having time to get their car washed, perhaps you could start a car washing business. If your neighbor works full time and has a dog, maybe they need a dog walker.
Join online communities to find potential clients. Use social media to promote yourself and find clients.
If you'd rather make money online, you could start a dropshipping business, be an affiliate marketer, or even do online surveys.
If you are crafty you can start a print-on-demand business and sell items you designed. Or start an online store where you sell your creations.
Related: How to become a freelancer: Side hustle Pro Tips
